Effect of Adoption of Accounting Principles on Financial Accountability Among State Corporations in Nakuru City

Abstract

Abstract Financial Accountability remains a persistent challenge in Kenya despite the establishment of legal frameworks and the adoption of international accounting standards. Many state corporations continue to face audit queries, misstatements, and weak transparency in financial reporting, undermining the credibility of public financial management. The study, guided by Agency Theory and Stewardship Theory, examined the effect of adopting accounting principles on financial accountability among state corporations in Nakuru City. The specific objectives were to assess the effects of the historical cost, materiality, and consistency, conservatism principles on financial accountability. The study adopted a descriptive research design and targeted a population of 140 accounting, finance, and audit officers drawn from state corporations based in Nakuru City. A sample of 103 respondents was selected via stratified random sampling to ensure adequate representation across departments. Data were collected using a structured questionnaire and analyzed using both descriptive and inferential statistics with the Statistical Package for the Social Sciences (SPSS). Descriptive statistics, including means and standard deviations, were used to summarize the data, and multiple regression analysis tested the hypothesized relationships at the 5% significance level. The results indicated that adopting accounting principles had a significant positive effect on financial accountability (R² = 0.618; F(4,98) = 39.62; p < 0.05). Among the principles, the consistency principle (β = 0.356, p < 0.001) and the conservatism principle (β = 0.334, p = 0.002) had the strongest positive effects, suggesting that maintaining uniform reporting and exercising prudence in accounting practices significantly enhance accountability. The historical cost principle (β = 0.241, p = 0.012) and the materiality principle (β = 0.198, p = 0.021) also had positive though moderate influences on accountability. The study concluded that effective adoption of accounting principles enhances the accuracy, transparency, and reliability of financial reports in state corporations. It recommends continuous professional development for accounting personnel, automation of accounting systems to promote consistency, and strict enforcement of financial regulations to improve compliance and safeguard public resources. Strengthening adherence to accounting principles will enhance accountability and restore public confidence in Kenya’s state corporations.